Vegan shark circles Hollywood IPO

Cartoon: DreamWorks' latest film, `Shark Tale,' is getting mixed reviews and may affect prospects of firm's IPO.

October 02, 2004|By Lorenza Munoz | Lorenza Munoz,LOS ANGELES TIMES

HOLLYWOOD - Fresh off its blockbuster Shrek 2, DreamWorks now begins playing to a whole new audience - Wall Street investors anxious to see whether its new film Shark Tale sinks or swims.

The computer-animated movie about a vegetarian shark and a fast-talking tropical fish opened in theaters yesterday just as DreamWorks is poised to spin off its computer animation unit.

Although DreamWorks hit pay dirt with two Shrek films, the initial public stock offering has the studio under pressure to show it's no one-trick pony - or, in its case, donkey.

In a recent Securities and Exchange Commission filing, DreamWorks Animation acknowledged much is riding on whether its new movie - featuring the voices of Will Smith, Jack Black, Renee Zellweger, Robert DeNiro and Angelina Jolie - makes a splash.

"If Shark Tale fails to achieve domestic box office success," the document says, "its international box office and home video success will be in doubt and our ... financial condition could be adversely affected in 2005 and beyond."

Although some of that passage reflects the boilerplate language of a SEC filing, it nonetheless underscores the stakes involved.

The 10-year-old Glendale studio, founded by moguls Jeffrey Katzenberg, Steven Spielberg and David Geffen, is expected to raise as much as $650 million in the spinoff, now expected late this month. A successful offering also is a crucial step if billionaire Paul G. Allen, Microsoft Corp.'s co-founder, is to cash out as an investment partner.

DreamWorks spokesman Andy Spahn declined comment, citing SEC rules restricting companies from publicly discussing pending stock offerings.

Computer animation is one of the most competitive arenas in the entertainment industry; the public has shown a clear preference for the genre's brilliant graphics and irreverent storytelling over traditional hand-drawn animation. A digitally animated film typically takes three to four years to complete and costs more than $100 million.

DreamWorks Animation already suffers from inevitable comparisons among investors to rival Pixar Animation Studios. The publicly traded company, based in Emeryville, Calif., is five-for-five in animated hits that include Toy Story, Monsters, Inc. and Finding Nemo.

"You look at Pixar, they bat a thousand," said Tom Taulli, co-founder of Currentofferings.com, an IPO research company. "Pixar has set the bar extremely high for a company like this."

But media analyst Anthony Valencia of TCW Group, a large shareholder in Pixar, said DreamWorks is hardly out of the game. Valencia said that if Shark Tale can perform anywhere near the level of the Shrek franchise, "then that will make investors feel that it is not a hit-or-miss or luck type situation."

That is a tall order. To date, Shrek 2, which starred Mike Myers as the cranky green ogre and Eddie Murphy as sidekick Donkey, has grossed $873 million worldwide. It surpassed Nemo as the most successful animated film of all time.

Thanks largely to the film's success, DreamWorks Animation reported revenue of $119.4 million in the six months that ended June 30, reversing a $115.5 million loss in the same period of 2003, according to SEC filings.

Unlike the near-unanimous praise from critics for the Shrek films, however, Shark Tale is drawing decidedly mixed reviews, with some critics contending that the film simply tries too hard to be funny.

DreamWorks' earlier hand-drawn efforts, such as last year's Sinbad: Legend of the Seven Seas, flopped, grossing only $27 million in domestic box office sales and prompting DreamWorks to abandon the traditional animation style altogether.

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